2023 rail fare rises - less than 10%?

[jfollows]

Today's Sunday Times reports (https://www.thetimes.co.uk/article/...d-news-it-wont-be-in-double-figures-2c27t5vqb) that fare rises in 2023 will take place in March and will be under 10%, which - by the formula used in previous years based on the previous year's July RPI figure - could have been higher. It's presumably not seen as politically sustainable to use RPI+x% again in 2023. It's not a surprise to me or many here that sales of flexible season tickets haven't been great, about 24,000 people are using them each month the article calculates. Also, a higher fare rise would probably feed through into a higher pay rise demand by rail workers, on the basis that "the railway" can afford it.

The bad news: rail fares are going to rise. The good news: it won’t be in double figures
Nicholas Hellen, Transport Editor |

Harry Yorke

, Deputy Political Editor

Sunday August 14 2022, 12.01am, The Sunday Times

Transport



Ministers have pledged to spare passengers a double-digit rise in rail fares and are devising a more competitive flexible season ticket to soften the impact of soaring prices.

Grant Shapps has intervened ahead of Wednesday’s announcement of the July retail prices index (RPI) measure of inflation, which could exceed 12 per cent after it hit 11.8 per cent in June. Fares are raised each January by a formula based on the RPI rate of the previous July.

If prices went ahead based on RPI this year, it would lead to the biggest increase for regulated fares since privatisation in 1993, far beyond the previous peak of 5.9 per cent in 2009.

Almost half of all fares are regulated, including commuter season tickets, some off-peak return tickets on long distance journeys, Anytime tickets around big cities and saver returns.

A government source said Shapps would negotiate with the Treasury for below-inflation increases and wanted to soften the blow further by ensuring that, for the third year in a row, the price rises came into effect in March instead of January. Last year’s settlement was 3.8 per cent, below the RPI figure of 7.1 per cent.

Even this may not be enough to revive the commuter market, which is running at only 56 per cent of pre-pandemic levels, according to the Rail Delivery Group, which represents train companies.

More than a year after the industry launched flexible season tickets in response to greater hybrid working, the government has asked it to improve the scope after sales failed to take off. The tickets are tailored to people who travel to work two days a week and who do not want to commit themselves in advance to particular dates. They can make return trips on eight days in a 28-day period.

About 340,000 of the tickets have been sold since June 2021, but this suggests that only 24,000 people are using them each month.

One of the drawbacks is that on longer commutes they are no cheaper than normal season tickets or paying for daily travel at full-fare rates. This is because season ticket holders on longer routes pay for less than two days a week at full-fare rates, leaving no room for more discounting. The biggest savings are on routes where weekly season ticket holders in effect pay full fares for more than three days.

The Department for Transport has asked Southeastern railway, which covers London, Kent and parts of East Sussex, to work on improvements. The rail operator has been under government control since last October, when an investigation found that Govia, its private operator, had failed to declare £25 million of taxpayer funding that should have been returned.

The fares settlement will be watched closely by the rail unions, which are embarking on the most intense week of strikes so far this summer.

A higher fare increase could be used by union negotiators to argue that their members need a pay rise to cope with the rise in the cost of living, but a small increase, or a freeze, as advocated by the Campaign for Better Transport, will increase the burden on the taxpayer. The cost of taxpayer support for the railways over the past two years equates to roughly £1,000 a household.

An estimated 6,500 train drivers belonging to Aslef were on strike yesterday in a dispute about pay at nine rail companies, including Avanti West Coast, Southeastern and West Midlands Railway. Five companies ran no services, while four others had a limited service.

London Euston and Birmingham New Street were among the stations to close, disrupting travel to Premier League football games and a Coldplay concert at Wembley Stadium. The Labour MPs Dawn Butler and Barry Gardiner joined picket lines in support of the strike.

There will be further national strikes on Thursday and Saturday involving an estimated 40,000 railway workers from the RMT union. They will affect Network Rail as well as more than a dozen other operators including LNER, Chiltern Railways and the Gatwick Express.

The Transport Salaried Staffs’ Association will also take part in industrial action on these days, although at some operators they will take action short of a strike.

The RMT has announced another strike on the London Underground on Friday.

Train drivers’ leaders will hold talks with the rail operators for the first time in the current dispute on Tuesday. Mick Whelan, general secretary of Aslef, said: “We don’t want to go on strike — strikes are always a last resort but the companies, and the government, have, I’m afraid, forced our hand.

“We don’t want to inconvenience passengers because our friends and families use public transport too, because we believe in building trust in the railways in Britain, and because we don’t want to lose money by taking industrial action.”

The rail industry wants to take advantage of strong demand for leisure travel at weekends to improve Sunday services, which operate at about half the frequency of weekday services and, in many cases, rely on drivers volunteering for overtime.

This leaves operators struggling to deliver services when the weather is good or there are sporting events because the drivers can pull out at up to 48 hours’ notice. Leisure travel was at 117 per cent of pre-pandemic levels in the week ending July 31.

The Rail Delivery Group said:“The railway is vital to this country but with revenue still 20 per cent below pre-pandemic [levels], it can either adapt or decline.”

 

[JonathanH]

Today's Sunday Times reports (https://www.thetimes.co.uk/article/...d-news-it-wont-be-in-double-figures-2c27t5vqb) that fare rises in 2023 will take place in March and will be under 10%, which - by the formula used in previous years based on the previous year's July RPI figure - could have been higher. It's presumably not seen as politically sustainable to use RPI+x% again in 2023.

Where is the money going to come from to balance the books? Reduced staff costs (in real terms) is surely not going to offset the increases in other costs to the railway.

I appreciate that staff will be aggrieved if they see that their pay increases are less than the fares are going up by but even something like an 8% fare increase would still seem inconsistent with a 2% pay increase.

July RPI is due to be released on Wednesday. Presumably this story is intended to pre-empt the usual first wave of stories about rail fares automatically going up by the usual formula.

Of course, a different option the government could take is to apply the full increase in two steps, once in January or March, and a subsidiary increase at one of the other review points.

 

[Watershed]

Today's Sunday Times reports (https://www.thetimes.co.uk/article/...d-news-it-wont-be-in-double-figures-2c27t5vqb) that fare rises in 2023 will take place in March and will be under 10%, which - by the formula used in previous years based on the previous year's July RPI figure - could have been higher. It's presumably not seen as politically sustainable to use RPI+x% again in 2023. It's not a surprise to me or many here that sales of flexible season tickets haven't been great, about 24,000 people are using them each month the article calculates. Also, a higher fare rise would probably feed through into a higher pay rise demand by rail workers, on the basis that "the railway" can afford it.

It's no surprise that Flexi Season sales have been so poor. It offers a maximum of 12.5% off - and less than that in many cases. It's a rubbish deal for almost all journeys.

Unless and until the Treasury get it through their heads that commuters won't return if they're expected to pay Anytime prices for a part time commute, nothing will change.

 

[JonathanH]

Unless and until the Treasury get it through their heads that commuters won't return if they're expected to pay Anytime prices for a part time commute, nothing will change.

I'd imagine they are quite content for there to be no change, particularly it means some of the decisions to reduce rolling stock and not implement enhancements don't need to be reversed. Given some commuters are having to pay those anytime prices, would offering cheaper fares to entice more passengers actually offset the lower yield from the people already paying a higher price?

 

[Starmill]

Where is the money going to come from to balance the books?

This has never been a realistic expectation. Fares could rise by 20% a year and it still wouldn't become a realistic policy. To say nothing of the ignorance of elasticity here.

In order to achieve a "balanced" budget you need to increase real revenue and simultaneously improve productive efficiency. This is only possible by increasing scale and committing to significant capital expenditure. Neither are currently happening. The long story short is the market has shrunk, which means by definition it will be less efficient in the long term.

 

[JonathanH]

I wasn't suggesting a true balancing of the books, just enough to mean that subsidy doesn't increase from its current level. All of the 'spending departments' will be under pressure to reduce budgets yet further. Getting the fare increase right is part of that.

 

[Starmill]

It's no surprise that Flexi Season sales have been so poor. It offers a maximum of 12.5% off - and less than that in many cases. It's a rubbish deal for almost all journeys.

Unless and until the Treasury get it through their heads that commuters won't return if they're expected to pay Anytime prices for a part time commute, nothing will change.

I think unfortunately that the flexi-seasons are mainly there as 'window dressing'. Most people in the industry know that they're not actually going to make any measurable difference, but they're the best they were able to achieve. If their validity were longer, I'm sure uptake would be slightly higher too. But obviously this would increase liabilities slightly.

I wasn't suggesting a true balancing of the books, just enough to mean that subsidy doesn't increase from its current level. All of the 'spending departments' will be under pressure to reduce budgets yet further. Getting the fare increase right is part of that.

In the short term i.e. this fiscal year and next, the government is contracted to pay the additional subsidy. If it goes up, which I imagine it will do, it goes up. If it goes up by a couple of percentage points but it's still forecast to fall the year after that might be acceptable. The Department also has a small amount of leverage, it can choose to defer spending on bus services or road maintenance, or whatever it may be, if an overspend at TOCs is identified. Doing this in a timely fashion will keep the wolves at bay.

Obviously if it goes up by more than a couple of percentage points or if it causes the Department to breach their limits then orders for bigger cuts will be the response.

If the government holds ticket prices below CPI that will also remove an upward pull on general inflation next year, which is politically desirable to them (kind of).

It's the same as what happens if the government loses a court case and is ordered to pay out compensation or handed a fine. They just find the money first, and then deal with the consequences later.

 

[WatcherZero]

Been confirmed, fare rise will be delayed until March again and will be less than 12.8% but sounds like they havent decided a figure.

 

[Haywain]

Been confirmed, fare rise will be delayed until March again and will be less than 12.8% but sounds like they havent decided a figure.

I don't find "less than 12.8%" very reassuring!

 

[Hadders]

Suspect the rise will be kept below 10% so that the new PM can have a bit of 'good' publiciity about keeping a handle on the cost of living.

 

[jfollows]

See https://www.bbc.co.uk/news/business-62542538

Rail fares in England to rise below inflation rate, ministers say​

By Becky Morton
Business reporter, BBC News

• • Published
    1 hour ago

Regulated train fares in England will rise below the rate of inflation next year to help people with the cost of living crisis, the government has said.
Before the Covid pandemic, fares were raised in January each year, based on the retail prices index (RPI) measure of inflation from the previous July.
The normal formula is RPI plus 1%. RPI in June was 11.8% - but it is not known what next year's increase will be.
As well as being lower than RPI, the increase will be delayed until March.
The pledge was first reported by the Sunday Times.
Regulated fares cover about 45% of fares, including season tickets on most commuter journeys, some off-peak return tickets on long distances journeys and anytime tickets around major cities.
The June rate of RPI figure was the highest rate in more than 40 years.

• Highest rail fare rise in nine years takes effect
• When are the next train strikes?

In March, England and Wales saw the steepest increase in regulated train fares since January 2013, with a rise of 3.8%.
Rail fare increases are normally introduced on the first working day of every year but have been delayed until March every year since the Covid pandemic.
Fares for rail services in Northern Ireland are set by state-owned operator Translink, which does not use RPI. The Scottish government has not announced its plan for next year yet. Wales usually matches changes made in England.
A Department for Transport spokeswoman said: "The government is taking decisive action to reduce the impact inflation will have on rail fares during the cost of living crisis and will not be increasing fares as much as the July RPI figure.
"We are also again delaying the increase to March 2023, temporarily freezing fares for passengers to travel at a lower price for the entirety of January and February as we continue to take steps to help struggling households."
The pandemic saw a steep drop in the number of train passengers, as more people worked from home, and numbers have remained well below pre-Covid levels.
Rail workers continue to strike over pay, with unions calling for pay increases to match the rising cost of living.
On Saturday around 6,500 train drivers who are members of the Aslef union walked out in a dispute over pay with nine rail companies.
More strikes are planned for the coming week, with members of the RMT and TSSA unions walking out on 18 and 20 August
Industrial action will also be taken on 19 August by London Underground and London bus drivers.

One forecast (https://uk.investing.com/economic-calendar/rpi-267) for the July RPI figure, released on Wednesday at 7am, is for 12.0%.

 

[Starmill]

I don't find "less than 12.8%" very reassuring!

Indeed not. A potential 9% rise in the context of a recession is quite concerning. Although as ever I suppose 'wait and see' is about all we can do about it!

 

[Hadders]

Also, rail fares are part of the basket of goods used to calculate inflation so a large increase in fares just helps to keep inflation higher for longer.

 

[bakerstreet]

“Delayed until March to help with the cost of living” I heard in the news this morning.

Given 2023 is the third year of such a ‘delay’, surely the bonus only exists in the first year. Now it’s an annual March increase.
For how many years will this be billed as a bonus ?

 

[The Quincunx]

The highest cap since the current system came into effect was 6% in both 2009 and 2012. In 2009, Southeastern and Northern had RPI+3%, making 8%. Remember that there was still 5% "flex" on individual fares, so the very highest an individual Southestern or Northern regulated fare could increase in 2009 was 13%.

 

[Richardr]

“Delayed until March to help with the cost of living” I heard in the news this morning.

Given 2023 is the third year of such a ‘delay’, surely the bonus only exists in the first year. Now it’s an annual March increase.
For how many years will this be billed as a bonus ?

Until they decide to move it to January again as a hidden increase.

 

[jfollows]

Today's figures released for July 2022 (https://www.ons.gov.uk/economy/inflationandpriceindices#timeseries):
CPIH 8.8%
CPI 10.1% ("headline inflation rate")
RPI 12.3% (the base figure government uses for charging increases such as rail fares, which is almost always greater than CPI, but is no longer used for paying out increases such as benefits)
RPI+1% 13.3% (a previous formula used for increasing regulated rail fares)
.... so anything less than 13.3% will get the usual "spin" of how good the government is being on saving people money on rail fares.

EDIT From post #11 above,

The government is taking decisive action to reduce the impact inflation will have on rail fares during the cost of living crisis and will not be increasing fares as much as the July RPI figure.

so <12.3% is what this means to me.

 

[Richardr]

As mentioned in relation to similar stories from the DfT, there will be a new Prime Minister in the first week of next month, and a cabinet reshuffle at that point. Nothing being "suggested" now will necessarily hold.

Is this not just an attempt to eliminate at least one instance of the media trumpeting the next fare rise - once when the RPI is released, a second time when the rise is confirmed, and the third on the day of the rise?

 

[Starmill]

As mentioned in relation to similar stories from the DfT, there will be a new Prime Minister in the first week of next month, and a cabinet reshuffle at that point. Nothing being "suggested" now will necessarily hold.

Delaying the date probably is irreversible, or will be in a few weeks time. It takes the Department so long to turn around a decision now that they are unlikely to be able to get the rate to the industry in time to implement a traditional early January increase.

As you say, for the actual rate we must wait and see.